Report on inventory management of Japanese Companies

          Just-in-time is the inventory management approach introduced by Japanese Companies. According to this approach, organizations need to purchase or product inventory when it is required as stocking inventory can cause to increase inventory management cost. While lean management is about the elimination of waste material, over processing, motion, waiting, and extra- stocking. Companies adopt Just-in-time approach and lean management approach to cut the cost of operations and to ensure efficiency in business operations.        

·         Their Main functions of inventory management of Japanese Companies

            The key functions of Just-in-time approach and lean management approach are to facilitate an organization runs their operations in the appropriate manner to aligning all process in the desired order at the production plant, and warehouse of inventory storage.  Moreover, the main functions of the lean management approach are controlling waste associated with motion, extra-processing, transportation, and defects (Duplock, et al., 2011). Lean management approach enables a company to bring improvement in the workflow and remove all other types of unnecessary production steps.  Basically, in logistics, lean management and Just-in-time approach are quite important as on these approaches’ success of the whole production process depends. 

             Actually, it is commonly assumed that inventory storage saves the time of processing and production at the time of order delivery. But such theory only works in the circumstances when the optimal level of inventory storage is maintained  (Andersson, et al., 2006). While on the other hand, extra production and storage of inventory just possess risk for inventory wastage, breakage, and an increase in the cost of operations. In such a situation, organizations use JIT and lean management approach to maintain the optimal level of inventory in their warehouses and get cost advantages.     

·         Any local example of inventory management of SABIC company in Saudi Arabia

          In Saudi Arabia, companies are seeking opportunities to bring improvement in logistics management. There are many companies following lean management and Just-in-time approach to maintaining the cost of inventory management. A big name in oil, gas, and polymer industry is SABIC Company. According to (Geautomation.com, 2009) SABIC company is using lean and just-in-time approaches for their inventory and logistics management. SABIC company is working in a highly competitive market where a single mistake can change the fortune of the company. They cannot bear financial loss therefore; the company tries its maximum to control cost and maximize their profit. Other than this another major reason is the risk factor. As the company deals with the petroleum and chemicals that can push the whole organization in endangering situation just because of a small mistake in handling. Therefore, the company avoids to store extra inventory in the warehouse. The product, pack and store products according to the frequency of orders.      

·         Reasons with suitable Examples why we need to follow  inventory management of Japanese Companies. 

          Lean thinking and just-in-time have several benefits for the organizations that encourage the managerial staff to adopt these strategies in their organization. For instance, Just-in-time increase the frequency of purchases. When companies purchase product continuously from the same supplier the relationship between supplier and company get strength. As a result of this companies can get discount offers from suppliers. Just-in-time also reduces the chances of waste and breakage. In case of wrong purchases (as the company received a poor-quality material) company have less loss as compared to the situation in which company place order for bulks (more than the requirement of the company).    

References of  inventory management of Japanese Companies

Andersson, R., Eriksson, H. & Torstensson, H., 2006. Similarities and differences between TQM, six sigma and lean. The TQM Magazine, 18(03), pp. 282-296.

Duplock, R., Yarlagadda, P. K. D. V., Ajuhani, M. M. & Karim, A., 2011. Implementation of Lean Manufacturing in Saudi Manufacturing Organisations: An Empirical Study. Advanced Materials Research, Volume 339, pp. 250-253.

Geautomation.com, 2009. Lean production initiative reduces costs through Electronic Work Instructions, Corrective Action and Production Orchestration in Lexan Factory. [Online]
Available at: http://www.geautomation.com/node/13000